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ERROR CODE F2441-014-01, FSA Child Care

taxxman02
Level 3

Taxpayer had FSA benefit taken from his wages and was reported in box 10, but due to Covid-19 all childcare was cancelled. I entered zero expense yet the program entered the amount on line 15 of 2441, which added to taxable income on 1040 ln 7 which was what I expected. E-filed the return and it was rejected with Error F2441-014-01. The explanation says each Care Provider must have an corresponding amount. Is there a work around in Proseries Pro, I added the benefit amount to line 14 on  2441 but that then reduced his income on line 7. I can not find anything about carrying 2020 amount forward. All suggestions welcome.

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8 Replies 8
George4Tacks
Level 15

delete the child care providers

 


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qbteachmt
Level 15

"which added to taxable income on 1040 ln 7 which was what I expected."

Is the perspective of this next sentence per the software or per the provision: "I can not find anything about carrying 2020 amount forward."

Are you having them taxed on the amount or did their employer elect to allow it to meet the relief provision(s)?

https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/irs-guidance-clarifies-relief-for-fs...

 

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Terry53029
Level 12
Level 12

To be clear, you are saying your client did not have any child care expenses in 2020, and his employer gave him child care benefits in box 10. Which would have been tax free wages. Now that income must be added to his income and taxed. I would put a zero in box 10, delete the 2441, right click on the 1040 line 1 (right click on the dots to the left of line 1) click on  magnifying glass, scroll down to line 11, and put the box 10 amount on line 11   

qbteachmt
Level 15

"Now that income must be added to his income and taxed."

 

Oh, if it only were this obvious.

"Employers can now offer employees participating in health flexible spending accounts (FSAs) and dependent care FSAs greater flexibility for rolling over unused funds through 2022, under new IRS guidance.

IRS Notice 2021-15, issued Feb. 18, addresses how to apply the FSA relief provisions in the Taxpayer Certainty and Disaster Relief Act, which was incorporated into the Consolidated Appropriations Act (CAA) signed into law near the end of 2020.

"As a result of COVID-19, participating employees are more likely to have unused health FSA or dependent care [FSA] amounts at the end of 2020 and 2021," the IRS announcement said.

"The IRS was very responsive to the benefits community in providing this guidance in a timely fashion," said William Sweetnam, legislative and technical director at the Employers Council on Flexible Compensation, which represents sponsors of account-based benefits plans. "The COVID-19-related relief that Congress provided in the Consolidated Appropriations Act, 2020, addressed many of the problems that individuals who contributed to health FSAs or dependent care assistance FSAs were facing, since the pandemic limited opportunities to spend the funds they contributed for their own health care or to pay expenses to care for dependents."

Employers that want to provide this relief "must make a number of decisions to determine what changes to their FSA plans are needed," Sweetnam said. "Notice 2021-15 provides details on how these relief provisions will operate.""

Right now, there is more than the short carry-over grace period.

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rbynaker
Level 11

Mine were all over the place for 2020.  I would think there would at least be some expenses from Jan/Feb and maybe into Mar, 2020.  You may need to have your client check with the plan administrator to find out what the policy was for unused funds (the rules were relaxed at the federal level but it was up to each plan administrator as to whether or not the more flexible rules were adopted for the particular employer plan.)  The last one I finished (yesterday) had a reimbursement that exceeded the expenses because after the expenses were submitted the daycare closed and refunded everybody.  So the taxpayer got the money (pre-tax) out of the FSA as a reimbursement and again as a refund from the care provider.  So that excess was taxable, but there was also an amount that they were able to carry over to 2021 which we were able to enter in Part III on Line 14 (which means this mess will continue into 2021, ugh.)

Just one more fun thing to reconcile on the 2021 return!

Rick

Terry53029
Level 12
Level 12

I believe most of know the rules for section 125 plans were relaxed due to covid, but knowing the rules were relaxed does not help @taxxman02 with his problem IE: return was rejected. How can he get the return filed. I suggested one way he could do it, and he can always amend later if needed. Does anyone know of someway to refile Taxman's client quickly, as soon he cannot efile it until next year

taxxman02
Level 3

I would like thank everyone who took the time to answer my question, my client hasn't answered my calls about whether he could carry forward to next year, so I went ahead and removed the Care Givers name as suggested, the program carried  the benefit to line 15 and made it taxable income on line 7. I refiled this morning and the IRS accepted today. I could always amend the return should the benefit be able to be carried forward.

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taxxman02
Level 3

Finally spoke with the client this morning, turns out the Care Provider was paid before cancelling the program, they gave the taxpayer an option that they will credit the taxpayer as paid and hold onto the fees until 2021 when the program opened back up. So can we show the benefit was paid since it was and claim it for 2020, because I really don't care what the Care Provider does they were paid by the taxpayer.